Six members of Congress want attorney general to review NJ lottery privatization

The upfront $120 million payment from a group planning to run the state’s lottery may violate a Justice Department opinion, New Jersey’s Democratic congressmen said Wednesday in a letter to the U.S. attorney general.

The six members of Congress asked Attorney General Eric Holder to examine the contract New Jersey announced last week. That request comes during the 10-day waiting period before that for-profit group can sign the contract to operate the state lottery.

The Christie administration announced last week it will award a joint venture called Northstar New Jersey a 15-year contract to take over sales and marketing for the $2.7 billion lottery.

The group agreed to pay New Jersey $120 million upfront and promised to increase lottery profits by a total of at least $1.42 billion over the life of the contract, according to the state Treasury Department. It will be able to keep a portion of the lottery’s revenue — up to 5 percent — if it meets or exceeds certain goals.

In their letter, the congressmen say they worry the $120 million payment runs counter to an opinion written by the Justice Department in 2008.

“This opinion explicitly stated that, in order to prevent corruption or the appearance of corruption, a state should not receive any upfront payment from a private lottery manager,” the letter says.

The state Treasury Department indicated it expects the contract will stand up to legal scrutiny.

“The contract was fully vetted by the New Jersey Attorney General’s Office and its outside legal specialists, and we have every confidence that it meets all legal requirements, including those of the Department of Justice,” Treasury spokesman Bill Quinn said in a statement.

The lawmakers’ letter asks for a review of the contract “in order to avoid costly legal challenges should it be deemed unlawful in the future.”

And it requests the attorney general work quickly. New Jersey is in the middle of a 10-day protest period, giving third parties a chance to object to the contract. Northstar cannot sign the agreement until after the protest period ends.

“It is very troubling that there are still so many questions surrounding this proposal,” Payne said in a statement. “We are looking out for the people of New Jersey by asking for a simple review to ensure the state is doing its proper due diligence.”

Governor Christie’s office declined to comment.

The Justice Department opinion was written in 2008 as states began considering lottery contracts with private companies. It examined what sorts of relationships between companies and states would comply with federal law governing lotteries.

The Communication Workers of America, which represents many lottery employees and endorsed Christie’s likely Democratic opponent in this year’s election, praised the lawmakers for requesting the review.

“New Jersey's congressional leaders should be commended for protecting taxpayers and jobs while the Governor refuses to take even the most basic steps to safeguard New Jersey's valuable public resources,” Seth Hahn of the CWA said in a statement.

Senate Majority Leader Loretta Weinberg, D-Teaneck, issued a statement asking Christie to “put the contract on hold” until it is reviewed by the attorney general.

Earlier this year, the Pennsylvania attorney general rejected a contract in that state that would have allowed the British firm Camelot to operate the Pennsylvania lottery. The attorney general’s decision did not rely on the Justice Department opinion, instead finding that privatization infringed on the General Assembly's constitutional authority and legal powers given to the state's Gaming Control Board.